WASHINGTON (CNN) -- The Bush administration has authorized the U.S. military to capture or kill Iranian agents in Iraq who are plotting attacks against U.S. and coalition forces, a U.S. national security official said Friday.

The policy, approved by President Bush in the last couple of months, is aimed at Iranian agents planning attacks with Iraqi militiamen, the official said.

"Some are trying to say that because we're helping ourselves in Iraq by stopping outside influence from killing our soldiers or hurting Iraqi people that we want to expand this beyond the borders," Bush said.

"That's a presumption that's simply not accurate. We believe that we can solve our problems with Iran diplomatically. And we're working to do that -- as a matter of fact we're making pretty good progress on that front." (Read Bush's policy defense: "I'm the decision-maker")

The White House has rejected calls by the Iraq Study Group to engage diplomatically with Iraq's neighbors, including Iran, and says it will not do so until Iran moves to end its alleged nuclear weapons program. (Read the group's recommendations)

Once branded by Bush as part of an "axis of evil," Iran has denied interfering inside Iraq's borders.

Bush and his advisers had discussed the new Iran policy since last fall. The president decided to authorize it when the situation in Iraq continued to deteriorate and because the United States is looking to get tougher with Iran, the official said.

The Washington Post first reported the development, citing "government and counterterrorism officials with direct knowledge of the effort."

Defense Secretary Robert Gates told reporters he agrees with the president. "Our forces are authorized to go after those who are trying to kill them," he said. "If you're in Iraq and trying to kill our troops, you should consider yourself a target."

Asked whether the measure is part of an "anti-Iran strategy," Gates said he does not think so, but "we're not simply going to stand by and let people bring sophisticated IEDs into the country that can disable an Abrams tank and give them a free pass. But as we've said before, we think we can handle this inside the borders of Iraq and the operations are limited to inside the borders of Iraq."

A statement from National Security Council spokesman Gordon Johndroe on Friday said: "The president has made clear for some time that we will take the steps necessary to protect Americans on the ground in Iraq and disrupt activity that could lead to their harm. Our forces have standing authority consistent with the mandate of the U.N. Security Council."

"Iranian Revolutionary Guards Quds Force is a part of the Iranian state apparatus that supports and carries out these activities," the statement said.

Iranian report calls policy 'terrorist measures'

The Iranian mission to the United Nations, when asked about the U.S. policy toward Iranians, pointed to an article in the semi-official FARS news agency.

In the article, the chairman of the Iranian Parliament's national policy commission, Alaoddin Boroujerdi, called the policy terrorism.

"Such moves are deemed as terrorist measures and are in blatant contradiction to the international rules and regulations," Boroujerdi said, according to Iran's semi-official FARS news agency.

"Such a measure illustrates the failure of the United States' new strategy in Iraq, because it has had no effect in quelling unrests and restoring calm and order and has instead roused intensified reactions in Iraq."

Boroujerdi said Iraq's government would share responsibility if reports of the "illogical and incredible" policy are true, FARS reported.

An Iranian official at the United Nations, who did not wish to be identified, told CNN the new U.S. policy will neither help bring peace to Iraq nor help Americans and Iraqis. The Iranians, he said, are in Iraq to help.

This month, U.S. forces detained five Iranians in the northern Iraqi city of Irbil, a U.S. military officer said. (Full story)

A preliminary investigation found links between the detainees and the Iranian Revolutionary Guard, which has provided funds, weapons, bomb technology and training to extremist groups in Iraq, the coalition said.

The Ghazel pet market is a popular destination on Fridays. People gather to sell and buy monkeys, cats, dogs and other animals.

In Friday's attack, a witness told The Associated Press that a carton containing pigeons blew up as potential buyers gathered around.

"My friends and I rushed to the scene where we saw burned dead bodies, pieces of flesh and several dead expensive puppies and birds," market customer Raad Hassan told the AP.

Also Friday, a U.S. Marine assigned to Regimental Combat Team 6 died after being wounded in Iraq's volatile Anbar province, the U.S. military announced.

The latest death brings the number of American military personnel who have died in Iraq to 3,058. Seven civilian contractors of the Defense Department also have been killed in the war.

Two more bombings in Baghdad on Friday morning wounded four civilians, and Iraqi police discovered six bullet-riddled bodies showing signs of torture dumped in an open yard in central Baghdad.

Other developments

Four U.S. soldiers who the military reported killed in an attack in Karbala last week were actually found as far as 25 miles away -- three dead and one mortally wounded, U.S. and Iraqi sources told The Associated Press on Friday. The attackers posed as U.S. military officials to get past Iraqi guards, a Karbala police spokesman told CNN. (Full story)

The body of well-known Iraqi boxer Hassan Hadi, who was kidnapped by gunmen Tuesday, was found Friday afternoon, a Baghdad police official said. Iraqi troops found Hadi's body in Haifa Street, in the central part of the capital, around 3 p.m. The official said that Hadi had been hanged.

U.S. House Speaker Nancy Pelosi and several other House members arrived in Iraq on Friday on a fact-finding mission and for talks with Prime Minister Nuri al-Maliki.The visit comes as several proposals circulate in Congress expressing opposition to an increase in U.S. troop levels. Defense Secretary Robert Gates said Friday that congressional lack of support "emboldens the enemy and our adversaries."

The Senate on Friday confirmed Lt. Gen. David Petraeus as the new top coalition commander in Iraq in a 81-0 vote.